3% Retention in the purchase-sale of properties in Spain

When a sale of a property located in Spanish territory, by a non-resident taxpayer in Spain occurs, the purchaser has the obligation to withhold and pay 3% of the purchase price of the property, as an advanced payment on account of the taxes of the non-resident seller. In other words, this 3% is a prepayment on the potential capital gain tax in Spain.

Please note that this is an obligation on the buyer, who is bound to the presentation of the form 211, for deposit of the 3% retention at the Spanish Inland Revenue, within one month from the date of transfer of the property.

Once the deposit or payment has been made, the purchaser will provide the seller with the form 211, “copy for the vendor non-resident”, to justify the deposit of the retention with the Tax Authorities in Spain.

What happens when the 3% retention is not made?

If the retention has not been deposited at Spanish Inland Revenue, the property transferred is subject to the payment of the amount, whichever is less, between the 3% retention and the corresponding tax due by the seller.

In addition, when the property is registered in the name of the purchaser, the Registry will state a warning in the registration document, informing that the 3% retention has not been paid.

Is there any exception to the obligation to withhold?

Yes, 3% retention will not be applicable when the seller proves his tax residence in Spain through a certification which must be issued by the competent authority of the Tax Office.

For more information, please contact us our Firm. Our Team of professionals specializing in Non-Residents Taxation will be happy to answer your questions and provide the advice you may need.